The document discusses the fiscal challenges facing the United States and emphasizes the need for comprehensive solutions rather than reliance on common myths about economic recovery. Historical comparisons are drawn to previous fiscal crises, highlighting the importance of leadership and governance to address growing deficits and national debt. Key statistics and projections about government spending, debt burdens, and public sentiment towards fiscal responsibility are presented to illustrate the urgency of the situation.

1. Comeback America: The Nation’s Fiscal
Challenge and A Way Forward
America at a Crossroads: Turning the Country Around and
Restoring Fiscal Responsibility
Dartmouth College
Hanover, NH
January 9, 2012
Hon. David M. Walker
Founder and CEO
The Comeback America Initiative
and
Former Comptroller General of the United States

2. Iowa’s Economic Concerns
The price of gasoline Other The stock market No opinion
1% 2% 1%
3%
13%
Taxes
Unemployment The Federal
Budget Deficit
20% 60%
Source: CNN/ ORC, Polls, Iowa & New Hampshire, Period Dec. 21-27, 2011. Compiled by TCAII.
Note: Mortgages and housing was under 1% and excluded from the graphic. Question posed was “thinking specifically about the economy, which of the following
is the most important economic issue facing the country today?”
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3. New Hampshire’s
Economic Concerns
Mortgages and housing costs The price of gasoline Other The stock market
3% 2% 1%
5%
8%
Taxes
The Federal 49%
Budget Deficit
Unemployment
31%
Source: CNN/ ORC, Polls, Iowa & New Hampshire, Period Dec. 21-27, 2011. Compiled by TCAII.
Note: No opinion was under 1% and excluded from the graphic. Question posed was “thinking specifically about the economy, which of the following is the most important
economic issue facing the country today?”
3

4. 4 Myths
There are a number of myths about how to solve the Nation’s
fiscal problems. The 4 most common are:
We can Grow our way out
We can Inflate our way out
We can Tax our way out
We can Cut our way out
The simple truth is that none of these by themselves will work
and all of them will play a role in order to restore our fiscal
sanity.
Compiled by TCAII
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5. Learning from the Past
The country is currently experiencing similar conditions as in
1992 when Ross Perot first ran for President.
Fiscal Irresponsibility
Political Dysfunction
Lack of Trust in Government
Absence of Public Confidence in the Future
The country is approaching an even bigger iceberg than in 1992.
We corrected our course then and can do so again if we “wake-
up” and get some committed and courageous leadership.
Compiled by TCAII.
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6. Deficits and Debt
(as a percentage of GDP)
3.0%
Federal Deficits (-) or Surpluses as a Percentage of GDP
2.4%
1.0%
1.4% 1.3%
0.8%
-0.3%
-1.4% -1.2%
-1.5%
-1.0% -2.2% -1.9%
-2.9% -2.6%
-3.4% -3.5% -3.2%
-3.9% -3.9%
-4.5% -4.7%
-3.0%
-8.9% -8.7%
-5.0% -10.0%
-7.0%
U.S. Gross Debt as a Percentage of GDP
1992 2000 2011
-9.0%
98.7%
64.1%
57.3%
-11.0%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: Office of Management and Budget, Historical Tables, Table 1.3; Congressional Budget Office, The U.S. Federal Budget, December 2011: Infographic;.U.S. Department
of Treasury, Bureau of the Public Debt, Debt to the Penny; CBO, Long-Term Budget Outlook (June 2011); Compiled by TCAII. Note: 2011 Gross debt as of Sept 31.
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7. Congressional Approval
Approve Disapprove No Opinion
3% 18% 10% 3% 11%
34% 56%
78% 86%
1992 2000 2011
Source: Gallup, Political Polls. Compiled by TCAII.
Note: 1992 Poll taken March 3rd, 2000 Poll taken December 2nd – 4th, and 2011 Poll taken December 15th – 18th.
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8. Satisfaction with the U.S.
Satisfied Dissatisfied No Opinion
6% 3% 2% 12%
26%
46% 51%
68% 86%
1992 2000 2011
Source: Gallup, Political Polls. Compiled by TCAII.
Note: The question asked by Gallup is worded as such “In general, are you satisfied with the way things are going in the United States at this time?
1992 Poll taken November 11th – 12th, 2000 Poll taken December 2nd – 4th, and 2011 Poll taken November 3rd – 6th.
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9. Selected Key Founding Principles
• Limited but effective Government
• Individual liberty and opportunity
• Personal responsibility and accountability
• Rule of law and equal justice under the law
• Fiscal responsibility and intergenerational equity
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10. Growth of Government
Federal Spending
1800 2011 2040
2% 23.8% 36.8%
US GDP: $8.89 Projected US GDP: $14.65 Projected US GDP: $28.54
Billion Trillion Trillion
(Constant 2010 Dollars) (Constant 2010 Dollars) (Constant 2010 Dollars)
Source: Historical Statistics of the United States, Millennial Edition On Line, Cambridge 2006; CBO, The Budget and Economic Outlook: An Update, August 2011;
CBO, CBO’s Long-Term Budget Outlook, Supplemental Data, June 2011. Compiled by TCAII.
Note: Federal Spending for 2040 is based on the Alternative Scenario Estimates.
10

11. Composition of Federal Spending
(% of Total Outlays)
Defense Other Discretionary Medicare and Medicaid
Social Security Other Mandatory Net Interest
7% 6%
19%
12%
15%
42%
15%
18%
20%
4%
20% 21%
1970 2011
$944 Billion $3.47 Trillion
Source: CBO, The Federal Budget, Infographic, December 2011, Historical Tables. Compiled by TCAII. Note: All dollar amounts are in constant 2010 dollars. .
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12. Federal Spending &
the Political Party in Power
$4,000
Patient Protection and
Democratic Controlled Congress Affordable Care
Act of 2010
America Recovery and
$3,500 Reinvestment Act of 2009
Republican Controlled Congress
Medicare Prescription Drug,
Improvement, and Modernization Act
$3,000 of 2003 and the Invasion of Iraq
Split Congress End of Statutory Budget Controls
Billions of Constant 2010 Dollars
Deficit Reduction
Act of 1993 2001 Invasion
$2,500 Republican President of Afghanistan
Budget Enforcement
Act of 1990
Gramm-Rudman-Hollings
Balanced Budget and Emergency
$2,000 Democratic President Deficit Control Act of 1985
$1,500
End of WWII Social Security Act of 1965
(Medicare)
$1,000 Korean Conflict Vietnam Conflict
1950-53 1960-75
$500
$0
1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Fiscal Years
Source: OMB, Budget, Historical Tables, Table 1.3—Summary of Receipts, Outlays, and Surpluses or Deficits (−) in Current Dollars, Constant (FY 2005) Dollars, and as
Percentages of GDP: 1940–2016; Bureau of Labor Statistics, Inflation Calculator. Compiled by TCAII.
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13. Federal Revenues &
the Political Party in Power
$3,000 Economic Growth and Tax Jobs and Growth Tax
Relief Reconciliation Relief Reconciliation
Democratic Controlled Congress Act of 2001 Act of 2003
& &
Invasion of Afghanistan Invasion of Iraq
$2,500 Republican Controlled congress
Split Congress Omnibus Budget
Billions of Constant 2010 Dollars
Reconciliation Act
$2,000 of 1993
Democratic President Tax Reform Act of 1986
Economic Recovery
Tax Act of 1981
$1,500 Republican President
Revenue Act of 1964
$1,000 Vietnam Conflict
End of WWII 1960-75
Korean Conflict
1950-53
$500
$0
1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Fiscal Years
Source: OMB, Budget, Historical Tables, Table 1.3—Summary of Receipts, Outlays, and Surpluses or Deficits (−) in Current Dollars,
Constant (FY 2005) Dollars, and as Percentages of GDP: 1940–2016; Bureau of Labor Statistics, Inflation Calculator. Compiled by TCAII.
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14. Federal Debt Burdens
Intragovernmental Held Debt Publicly Held Debt
$16
$14.8 Trillion 99% of GDP
$14
$4.7 Trillion
$12 31.1% of GDP
In Trillions of U.S. Dollars
$10
$8
$5.6 Trillion 58% of GDP
$6 $10.1 Trillion
$2.3 Trillion 67.5% of GDP
$4
23% of GDP
$2 $3.4 Trillion
35% of GDP
$0
Sepetember 30th 2000 September 30th 2011
SOURCE: U.S. Department of Treasury, Bureau of the Public Debt, Debt to the Penny; CBO, Long-Term Budget Outlook (June 2011); OMB, Historical Tables, Table 1.2.
Compiled by TCAII.
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15. Historical Debt Burden
(1800 through 2011)
Intragovernmental Debt Public Debt
140%
120%
100%
Percentage of GDP
80%
60%
40%
20%
0%
1800 1810 1820 1830 1840 1850 1860 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010
Source: Congressional Budget Office, Long Term Budgetary Outlook 2009, Supplemental Data; Office of Management and Budget, Historical Tables, Table 7.1- Federal Debt
at the End of the Year 1940 through 2016. Compiled by TCAII.
15

16. Total Federal Debt Per Capita &
the Political Party in Power
$50,000
Democrat Controlled Congress As of 9/30/2011 $46,467
$45,000
Republican Controlled Congress
$40,000
Split Congress
Constant 2010 Dollars Per Capita
$35,000
Republican President
$30,000
Democratic President
$25,000
End of WW2 $ 22,183
$20,000
$15,000
$10,000
$5,000
$0
1915 1920 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
SOURCES: U.S. Census Bureau, U.S. Department of Treasury, U.S. Bureau of Labor Statistics, U.S. House, and U.S. Senate. Compiled by TCAII
NOTE: All amounts are adjusted for inflation and in 2010 Dollars. Federal Debt is the total public debt outstanding and intragovernmental holdings.
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17. Federal Financial Hole
(For Fiscal 2000 and 2011)
In Trillions of Dollars 2000 2011
Explicit Liabilities $ 6.9 $17.4
•Publicly Held Debt 3.4 10.1
•Military & Civilian Pensions & Retiree Health 2.8 5.8
•Other Major Fiscal Exposures 0.7 1.5
Commitments & Contingencies 0.5 1.9
E.g. Pension Benefit Guaranty Corporation, Undelivered Orders
Actuary's
Trustees’
Alternative
Estimates
Scenario
Social Insurance Promises 13.0 33.7 46.1
•Future Social Security Benefits 3.8 9.2 9.2
•Future Medicare Benefits 9.2 24.7 37.0
Future Medicare Part A Benefits 2.7 3.3 8.5
Future Medicare Part B Benefits 6.5 13.9 21.0
Future Medicare Part D Benefits - 7.5 7.5
Total $20.4 $53.2 $65.5
SOURCE: Data from the Department of Treasury, 2011 Financial Report of the United States Government. Compiled by TCAII.
NOTE: Estimates for the Actuary’s Alternative Scenario are found in note 26 of the 2010 Financial Report of the United States. Future liabilities are discounted to present value based on a real
interest rate of 2.9% and CPI growth of 2.8%. The totals do not include liabilities on the balance sheets of Fannie Mae, Freddie Mac, and the Federal Reserve. Assets of the U.S. government not
included.
17

18. If The U.S. was a Household
Household Income Statement
Per Week
(Constant 2010 Dollars)
Household Income $ 961
Household Expenses $ 1,495
Household Deficit $ (533)
Overall Household Debt, Liabilities, & Unfunded
Promises
Average Household Debt (as of Sept. 30, 2011) $ 126,000
Average Household Total Liabilities and
$ 531,000
Unfunded Promises (as of Sept. 30, 2010)
Sources: CBO, Budget and Economic Outlook: An Update, August 2011. Medicare
and Social Security Trustees Report 2011;. Census Bureau, Current Population
Survey, Table H-17. BLS, Inflation Calculator. Compiled by TCAII.
Note: Household expenses and deficit are calculated based proportionally on the
Federal Government’s finances and numbers may not add due to rounding.
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19. Our Fiscal Future
Revenues
50%
45% 8%
Other
40% Spending
35% 14%
8% Federal
Percentage of GDP
30% Healthcare
Outlays
25%
9% 11% 6%
20%
Social Security
12%
15% 8% 6%
10%
6% 19%
6%
Net
5% 11%
5% Interest
5%
0% 1%
2011 2024 2040 2055
Source: Congressional Budget Office, Long-Term Budget Outlook (June 2011), Summary Data for the Alternative Fiscal Scenario. Compiled by TCAII.
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20. CBO’s Public Debt Projections
Actual Projection: Alternative Fiscal Scenario Projection: Extended-Baseline Scenario
200%
180%
160%
187%
140%
Percentage of GDP
120%
100%
80%
60%
40% 84%
20%
0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
SOURCE: CBO, Supplemental Data for Congressional Budget Office's Long-Term Budget Outlook (June 2011), Figure 1-2.
Compiled by TCAII.
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21. Comparative Debt Burdens
2011 2016
180%
160%
140%
120%
Percentage of GDP
100%
80%
60%
40%
20%
0%
Greece Italy Portugal Ireland Spain United Kingdom United States
SOURCE: International Monetary Fund, World Economic Outlook Database, Sept. 2011. Compiled by TCAII.
Note: Data for 2011 and 2016 are estimates. Gross debt consists of all liabilities that require payment or payments of interest and/or principal by the debtor to the creditor at a date or
dates in the future. This includes debt liabilities in the form of SDRs, currency and deposits, debt securities, loans, insurance, pensions and standardized guarantee schemes, and other
accounts payable. Thus, all liabilities in the GFSM 2001 system are debt, except for equity and investment fund shares and financial derivatives and employee stock options.
Debt can be valued at current market, nominal, or face values (GFSM 2001, paragraph 7.110).
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22. Growing Foreign Dependency
Foreign Held Debt
1970 1990 2011
Total Public Debt Total Public Debt Total Public Debt
$283 Billion $2,412 Billion $10,127 Billion
5% 19% 46%
Source: Office of Management and Budget, Historical Tables; Department of Treasury, Major Holders of Treasury Securities, October 18, 2011, Debt to the Penny.
Compiled by TCAII.
Note: 2011 public debt and foreign held public debt reflect data from September 2011.
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23. Sovereign Fiscal Responsibility Index
(As of September 2011)
1. Australia (1) 18.Slovakia (16)
2. New Zealand (2) 19.Norway (15)
3. Sweden (4) 20.Austria (21)
4. Estonia (3) 21.France (23)
5. China (5) 22.Finland (22)
6. Chile (7) 23.Slovenia (20)
7. Luxembourg (6) 24.Germany (25)
8. India (12) 25.Spain (24)
9. Brazil (10) 26.Belgium (26)
10. Denmark (8) 27.Italy (27)
11. United Kingdom (9) 28.United States (28)
12. Netherlands (14) 29.Hungary (29)
13. Israel (19) 30.Iceland (32)
14. Canada (11) 31.Ireland (30)
15. Korea (17) 32.Japan (31)
16. Poland (13) 33.Portugal (33)
17. Mexico (18) 34.Greece (34)
Source: Comeback America and Stanford Graduate Students’ Sovereign Fiscal Responsibility Index. Compiled by TCAII.
Note: Based upon IMF data that was reported in September 2011 and does not take into consideration subsequent events.
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24. Social Security and Medicare
Key Dates and Data regarding the financial condition of the
Social Security and Medicare Trust Funds
Social Security Medicare
Current Beneficiaries 55.0 Million 46.3 Million
Year the Trust Fund begins
permanently operating with a 2010 2008 (HI Trust Fund)
negative cash flow
Trust fund exhaustion year 2036 2024
Discounted Present Value (PV) of
$8 Trillion $35.1 Trillion²
unfunded promises¹
0.71% 1.9%
Actuarial from the Social Security Administration, 2011 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors
Source: Data Balance as a % of GDP
Insurance and Federal Disability Insurance Trust Funds; and Centers for Medicare & Medicaid Services, 2011 Medicare Trustees Report; 2010
Financial Report of the United States Government, Notes to the Financial Statements, Note 26 . Compiled by TCAII.
1. Excludes current “assets” in the Social Security & Medicare trust funds.
2. Based on Medicare Actuarial projections that differ from current law.
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25. Comparative Health Costs
9,000
$7,960
8,000
The United States spends more than double the OECD average with below average
healthcare results.
7,000
Per Capita HealthCare Costs
6,000
U.S. Dollars
5,000
$4,363 $4,218
$3,978
4,000 $3,722
$3,361 $3,487
$2,983
3,000
2,000
1,000
0
OECD Average Canada France Germany New Zealand Sweden United Kingdom United States
Source: Organization for Economic Cooperation and Development, OECD Health Data 2011. Compiled by TCAII.
Note: Per capita health expenditures for 2009 uses purchasing power parity for all dollar amounts.
25

26. Relative Defense Spending
800
The United States spent more on defense in 2010 than the 15 highest defense budget combined.
$712 Billion
700
$673Israel
Billion
Turkey
Canada
600 Australia
In Billions of Constant 2010 Dollars
South Korea
Brazil
Italy
500
India
Germany
400
Saudi Arabia
U.S.A
Japan
300
Russia
France
200
United Kingdom
100
China
0
SOURCE: Stockholm International Peace Research Institute, SIPRI Military Expenditure Database 2011; Bureau of Labor Statistics, Inflation Calculator. Compiled by TCAII.
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27. 2011 Federal Revenue Composition
Total Revenue $2.2 Trillion in 2010 Dollars
Individual Income Taxes Excise
47% 3%
Corporate Income
Tax 8%
Estate and Gift 1%
Other 9% Custom Duties 1%
Miscellaneous 4%
Payroll Taxes 35%
Source: Congressional Budget Office, The Budget and Economic Outlook: An Update, August 2011. Compiled by TCAII.
Note: New figures for the components of other spending were not published. The same percentage of revenues for these figured is assumed from the June 2011 CBO report.
27

28. Progressive Tax System
28

29. Effective Federal Income Tax Rates
25%
20% 18.9%
17.5%
Effective Individual Federal Income Tax Rate
14.7%
15%
9.9%
10%
7.2%
5.7%
5%
3.2%
0.8%
0%
-2.9%
-5%
-5.4%
-6.7%
-10%
Less Than $10,000 - $20,000 - $30,000 - $40,000 - $50,000 - $75,000 - $100,000 - $200,000 - $500,000 - More Than
$10,000 $20,000 $30,000 $40,000 $50,000 $75,000 $100,000 $200,000 $500,000 $1,000,000 $1,000,000
Source: Urban Institute and Brookings Institution, Tax Policy Center, Distribution tables by Dollar Income Class, T11-0315 - Effective Federal Tax Rates by Filing Status
and Demographics, Under Current Law, by Cash Income Level, 2011. Compiled by TCAII.
29

30. CAI’s Fiscal Framework
Scope of CAI’s Illustrative Fiscal Frameworks:
• Budget Controls and Process Reforms
• Social Security
• Medicare, Medicaid, and Healthcare
• Defense and Other Spending
• Comprehensive Tax Reforms
• Constitutional Amendments
Compiled by TCAII.
30

31. Feasibility Test
Fiscal Reforms Must Meet a Feasibility Test:
1) Do they make economic sense?
2) Are they socially equitable?
3) Are they culturally acceptable?
4) Do they pass a math test?
5) Are they politically feasible?
6) Can they achieve significant bipartisan support?
Compiled by TCAII.
31

32. Transforming Government
(Basic Questions for Policies & Programs)
• When & why was it created?
• Have conditions changed, and have we adapted?
• How are we measuring success, and are we achieving desired
outcomes?
• Are there multiple programs, and if so are they working in an integrated
manner?
• Are we using the experience of others (e.g., countries, states) to
replicate success and avoid mistakes?
• Can we afford and sustain it in its present form?
Compiled by TCAII.
32

33. A Phased Approach
• Calendar Year 2012
› Resolution of Payroll, Unemployment, and Medicare
Physician Payment Issues (Short-Term)
› Tough 2013 Budget (Short-Term)
› Bush/Obama Tax Cut Decision (Short-Term)
› Possible Reconsideration of Debt Ceiling Automatic
Spending Cuts (Short-Term)
› Congressional Hearings (Structural)
› Citizen Education/Engagement (Structural)
• 2013 - ?
› Tough Budget Controls (Structural)
› Role and Size of Government (Structural)
› Government Transformational Commission (Structural)
› Comprehensive Social Security Reform (Structural)
› Health Care Coverage Reform and Cost Controls (Structural)
› Comprehensive Tax Reform (Structural)
33

34. What Can You Do?
• Test your fiscal knowledge by going to
www.fiscalIQ.net
• To educate others use the Fiscal Facts prepared
presentation and notes found on TCAII’s website.
• For further information about:
– Non-partisan facts and possible solutions on fiscal sustainability and
responsibility
Sign up at
The Comeback America Initiative’s website
www.TCAII.org
– Promoting progress over partisanship sign up at
No Labels website
www.NoLabels.org
Compiled by TCAII.
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